Fortis Healthcare said the nationwide lockdown due to novel coronavirus, or COVID-19, has negatively impacted occupancies across its hospital network. The company said it continues to face challenges in Q1F Y21, impacting its financial performance.
India's second largest hospital chain saw occupancy levels plummet to 29 percent in April due to a lockdown to contain COVID-19 from 71 percent in early March.
With the government gradually easing lockdown restrictions, the company said it is seeing occupancy levels climbing to 45 percent, but the same is nowhere close to what it was seeing before the outbreak of the pandemic.
"While revenue saw a sharp reduction in April, May exhibited signs of an early and gradual recovery," Fortis said in a statement.
"The impact of the pandemic is expected to continue throughout the April-June quarter and beyond till visible and sustainable signs of stabilisation and normalisation can be seen," the statement added.
Fortis said the drop in occupancies and revenue was to due postponement of elective procedures; significant drop in footfalls in outpatients department (OPD); inter-state and intra-state movement restrictions; and designating two major hospitals in Vashi, Navi Mumbai and Vasant Kunj Delhi as COVID-19 hospitals, impacting flow of normal patients.
Diagnostic volumes too dropped by 60 percent as people are postponing non-emergency diagnostic tests.
The company recorded a profit after tax of Rs 58 crore in FY20 against a loss of Rs 299 crore in the previous year. Revenue grew 3.6 percent year-on-year to 4,632 crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin doubled to 14.3 percent.
The management said despite a challenging environment, it has managed its liquidity position via cost efficiency initiatives, better working capital management and external funding. It does not expect any impact on its current ability to service debt.
IHH-Fortis deal still not clearedThe COVID-19 pandemic hit Fortis at a time when the healthcare provider has been charting a turnaround story with Malaysia’s IHH Healthcare, winning the bid to acquire the healthcare provider by infusing Rs 4,000 crore by way of preferential allotment in July 2018.
IHH also completed the acquisition of assets under RHT in January 2019, saving Fortis the entire clinical establishment fee being paid to RHT. Fortis hospital assets are housed under RHT, which is listed in Singapore. However, the proposed open offer to acquire up to 26 percent of the expanded capital of Fortis was stayed by Supreme Court in a case related to Daiichi Sankyo versus Singh brothers over Rs 3,500-crore arbitration.
The company said it had filed an urgent application for an early hearing on June 9, however, the application was not accepted by the court. The company again made a written request on June 12 to the Registry of the apex court to reconsider the urgent listing. Fortis said the matter is expected to be listed before Supreme Court on July 6 and the company is reviewing all legal options.
Cost cuttingMeanwhile, Fortis said it was able to reduce fixed costs by 25 percent.
The company said this they achieved primarily through voluntary salary reduction in both medical and non medical manpower; judicious capex spend; and delaying the launch of its ready to commission facility at Arcot Road, Chennai.
The company is also going slow and selective on hiring for next two-to-three months, reducing housekeeping and manpower cost and optimising other expense lines.
The management said it is in discussions for deferment, waiver and contract annual maintenance contract (AMC) renegotiations.
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